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> Not really. Almost all contracts are cash settled. The parent comment is 100% correct. You're missing the nuance of how commodity futures trading works. Yes
by cletus 7y ago
> Not really. Almost all contracts are cash settled.
The parent comment is 100% correct. You're missing the nuance of how commodity futures trading works. Yes most are cash-settled but there is a date after which if you hold the contract you're promising to make or accept physical delivery. The commenter is saying we reach that point for the May oil contract tomorrow so anyone who wants to settle in cash has to do so by tomorrow.
- bluGill 7y agoTrue, but there will be checking to ensure that you want oil if you are not normally a destination for oil. Trying to deliver oil to someone without a loading dock will be a problem that hurts many people trying to correct.
- thoraway1010 7y ago100% false. Where are these facts coming from? The specs for delivery are always very clear because price depends on where it needs to be delivered! "Delivery shall be made free-on-board ("F.O.B.") at any pipeline or storage facility in Cushing, Oklahoma with pipeline access to Enterprise, Cushing storage or Enbridge, Cushing storage." What does it mean to be "normally not a destination for oil" and who is doing this checking (do you realize the volume of oil that is traded monthly? The futures market being discussed here uses standardized contracts.
- bluGill 7y agoNot everyone is allowed to trade, there are rules if you don't have ability to accept oil they make it hard to get a contract that doesn't sell automatically. (not impossible, but a mistake guns up their processes so they have procedures to avoid it)
- OrangeMango 7y agoAnd you get the entire month of may to take delivery. If you become an accidental owner of crude oil tomorrow, you still have time to arrange a solution with someone that can take it. Financially, it doesn't sound like a good situation to be in though.
- ping_pong 7y agoYes, this almost happened to me once when I was trading futures. My broker called me several times throughout the day and I couldn't take the call. When I finally did, he told me to roll my contract forward that day otherwise I would have to take delivery of 1000 bushels of corn.
- caseysoftware 7y agoI'd love to hear from someone that got stuck with the 1000 bushels of corn (or similar). What do you do? How in the world do you manage that?
- draw_down 7y agoI remember this happened once, to someone who bought cocoa on the commodities market.
- lozaning 7y agoThere's a story online thats floated around for a while about a guy that ended up with like 10 tonnes of coal this way. Was delivered via barge somewhere if I recall correctly. Edit: finally found it: https://thedailywtf.com/articles/Special-Delivery https://thedailywtf.com/articles/Special-Delivery
- whatok 7y agoJohn C. Hull - Options, Futures, and Other Derivatives has details on an accidental cattle futures physical settlement. https://www.passeidireto.com/arquivo/73586616/john-c-hull-options-futures-and-other-derivatives-pearson-2017/19 https://www.passeidireto.com/arquivo/73586616/john-c-hull-op...
- koheripbal 7y agoThere are services you can call to help you out of this predicament. Obviously they charge a huge margin.
- bluGill 7y agoWorse it isn't 1000 bushes at your home it is at some transfer point several states away. If you are lucky it is an elevator that sends you a bill for storage and can unload them. If you are unlucky you need to get a truck (with a driver) there on short notice to get it out of there.